LRB-2160/1
PJD:kmg:ch
2001 - 2002 LEGISLATURE
February 8, 2001 - Introduced by Representatives Cullen and Gundrum,
cosponsored by Senators Huelsman and George. Referred to Committee on
Financial Institutions.
AB111,2,13 1An Act to repeal 402.326 (3), 411.303 (3), 411.307 (2) (b) and (c) and 411.307 (4);
2to renumber 402.210 (3), 402.210 (4), 402.210 (5), 402.502 (2) and 411.303 (6),
3(7) and (8); to renumber and amend 402.502 (1), 408.110 (5) (b), 408.110 (5)
4(c), 408.110 (5) (d), 408.301 (1) (c), 408.510 (3), 411.303 (4) and 411.303 (5); to
5consolidate, renumber and amend
411.307 (2) (intro.) and (a); to amend
630.57 (3), 30.57 (5), 30.57 (6), 30.57 (7), 30.57 (8), 30.573 (1), 30.573 (2), 30.576
7(1), 50.05 (15) (f), 51.42 (3) (d) 12. f., 59.43 (1) (L), 59.43 (1) (m), 59.43 (1) (n),
859.43 (1) (o), 59.43 (2) (ag) 2., 59.43 (2) (d), 100.201 (2) (d), 100.201 (2) (e) 1.,
9101.9213 (2), 101.9213 (4), 101.9213 (5), 101.9213 (6), 101.9213 (7), 101.9215
10(1), 101.9215 (2), 101.9218 (1), 101.9222 (5) (b), 109.09 (2) (b) 2., 138.09 (7) (i)
112., 340.01 (56m), 340.01 (56n), 342.19 (2), 342.19 (3), 342.19 (4), 342.19 (5),
12342.19 (6), 342.21 (1), 342.21 (2), 342.24, 344.185 (3) (intro.), 401.201 (9),
13401.201 (32), 401.201 (37) (a), 402.103 (3) (d), 402.326 (title), 402.326 (2),
14402.502 (title), 402.716 (3), 406.102 (1), 406.102 (2), 407.503 (1) (a), 408.103 (6),

1408.106 (4) (a) and (b), 408.106 (6), 408.110 (5) (a), 408.302 (1), 408.510 (1),
2411.103 (3) (a), 411.103 (3) (d), 411.103 (3) (e), 411.103 (3) (f), 411.103 (3) (h),
3411.103 (3) (j), 411.103 (3) (L), 411.103 (3) (m), 411.303 (1) and (2), 411.309 (1)
4(c), 421.301 (21), 422.413 (2r) (intro.), 422.413 (2r) (f), 425.105 (4), 425.203 (3)
5(intro.), 425.204 (2), 425.207 (2), 425.208 (6), 779.48 (2), 779.89, 779.91 (2),
6779.97 (4) (a) 1., 779.97 (4) (b) 1., 779.97 (4) (b) 2., 779.97 (4) (b) 3., 779.97 (4)
7(b) 4., 779.97 (4) (d), 779.97 (4) (e), 815.18 (2) (i), 815.18 (2) (j), 818.02 (4), 893.36
8(3) (b), 893.36 (3) (c), 893.36 (3) (e) and 893.36 (3) (f); to repeal and recreate
9401.105 (2) (e), chapter 409 and 411.307 (3); and to create 402.210 (3), 402.502
10(1) (a), 402.502 (2), 405.118, 408.106 (4) (c), 408.110 (5) (b), 408.301 (1) (c) 1. and
112. and 408.510 (3) (a) to (c) of the statutes; relating to: revising the Uniform
12Commercial Code — Secured Transactions and related statutes and granting
13rule-making authority.
Analysis by the Legislative Reference Bureau
This bill adopts the Revised Uniform Commercial Code (UCC) Article
9-Secured Transactions, which was approved by the National Conference of
Commissioners on Uniform State Laws and by the American Law Institute in 1998
and by the American Bar Association, with the amendments approved by the
national conference in 1999 and 2000.
UCC Article 9-Secured Transactions governs transactions that involve the
granting of credit secured by personal property of a debtor, allowing the creditor to
take the property if the debtor defaults on the debt. The changes that Revised UCC
Article 9-Secured Transactions makes include the following, which are discussed in
more detail below: 1) the scope of Article 9 is expanded to include kinds of property
such as deposit accounts, health care receivables, and commercial tort claims, that
were excluded in original Article 9; 2) perfection of a security interest by control is
available not only for investment property, but also for deposit accounts and
letter-of-credit rights; 3) the location of the debtor rather than the location of the
collateral determines where a security interest perfects; 4) a simplified and unified
system of filing financing statements in one place in each state to perfect security
interests replaces the original filing system that allowed certain local filing; 5)
consumers obtain certain rights that were not available in original Article 9, such as
specific disclosure of any deficiency rights that the creditor may have; and 6) new

rules for enforcement, such as a requirement that a creditor notify a secondary
obligor when repossessing goods that are subject to a security interest.
The UCC has 11 substantive articles. Article 9 provides the rules governing any
transaction (other than a finance lease) that couples a debt with a creditor's interest
in a debtor's personal property. If the debtor defaults, the creditor may repossess and
sell the property (generally called collateral) to satisfy the debt. The creditor's
interest is called a "security interest." Article 9 also covers certain kinds of sales that
look like a grant of a security interest.
There are two key concepts in the operation of Article 9: "attachment" and
"perfection." These terms describe the two key events in the creation of a "security
interest." Attachment generally occurs when the security interest is effective
between the creditor and the debtor, and that usually happens when their agreement
provides that it take place. Perfection occurs when the creditor establishes his or her
"priority" in relation to other creditors of the debtor in the same collateral. The
creditor with "priority" may use the collateral to satisfy the debtor's obligation when
the debtor defaults before other creditors subsequent in priority may do so.
Perfection occurs usually when a "financing statement" is filed in the appropriate
public record. Generally, the first to file has the first priority, and so on.
Article 9 relies on the public record because it provides the means for creditors
to determine whether there is any security interest that precedes theirs — a notice
function. The idea is that a subsequent secured creditor cannot complain that his
or her grant of credit was made in ignorance of the prior security interests easily
found in the public record, and cannot complain of the priority of the prior interests
as a result. Every secured creditor has a priority over any unsecured creditor.
Article 9 is more complex than the description in the two prior paragraphs
implies. There are substantial exceptions to the above-stated perfection rule, for
example. Filing is not the only method for perfection, depending upon the kind of
property that is collateral. Possession of collateral by the secured party is an
alternative method of perfection for many kinds of collateral. For some kinds of
property, control (a defined term) either perfects the interest or provides a better
priority than filing does. There are kinds of transactions for which attachment is
perfection. Priority is, also, not always a matter of perfecting a security interest first
in time.
The following numbered topics highlight Article 9 as revised in 1998:
1. Scope
The 1998 revision expands the "scope" of Article 9. What this means is that the
kinds of property in which a security interest can be taken by a creditor under Article
9 increase over those available in Article 9 before revision. Also, certain kinds of
transactions that did not come under Article 9 before now come under Article 9.
These are some of the kinds of collateral that are included in Revised Article 9 that
were not in original Article 9: sales of payment intangibles and promissory notes;
security interests created by governmental debtors; health insurance receivables;
consignments; and commercial tort claims. Nonpossessory, statutory agricultural
liens come under Article 9 for determination of perfection and priority, generally the
same as security interests come under Article 9 for those purposes.

2. Perfection
Filing a financing statement remains the dominant way to perfect a security
interest in most kinds of property. It is clearer in Revised Article 9 that filing a
financing statement will perfect a security interest, even if there is another method
of perfection. "Control" is the method of perfection for letter-of-credit rights and
deposit accounts, as well as for investment property. Control was available only to
perfect security interests in investment property under prior Article 9. A creditor has
control when the debtor cannot transfer the property without the creditor's consent.
Possession, as an alternative method to filing a financing statement to perfect a
security interest, is the only method for perfecting a security interest in money that
is not proceeds of sale from property that is subject to a security interest. Automatic
perfection for a purchase money security interest is increased from 10 days in prior
Article 9 to 20 days in Revised Article 9. Attachment of a purchase money security
interest is perfection, at least for the 20-day period. Then another method of
perfection is necessary to continue the perfected security interest. However, a
purchase money security interest in consumer goods remains perfected
automatically for the duration of the security interest.
3. Choice of Law
In interstate secured transactions, it is necessary to determine which state's
laws apply to perfection, the effect of perfection, and the priority of security interests.
The 1998 revisions to Article 9 make two fundamental changes from prior Article 9.
In prior Article 9, the basic rule chooses the law of the state in which the collateral
is found as the law that governs perfection, effect of perfection, and a creditor's
priority. In Revised Article 9, the new rule chooses the state that is the location of
the debtor. Further, if the debtor is an entity created by registration in a state, the
location of the debtor is the location in which the entity is created by registration.
If an entity is a corporation, for example, the location of the debtor is the state in
which the corporate charter is filed or registered. In prior Article 9, the entity that
is a debtor is located in the state in which it has its chief executive office.
4. Filing System
Changes in the filing system in the 1998 revisions to Article 9 include a full
commitment to centralized filing — one place in every state in which financing
statements are filed. Under Revised Article 9, the only local filing of financing
statements occurs in the real estate records for fixtures. "Fixtures" are items of
personal property that become physically part of the real estate, and are treated as
part of the real estate until severed from it. The bill anticipates that electronic filing
of financing statements will replace the filing of paper. Paper filing of financing
statements was already disappearing in a number of states in 1998, as Revised
Article 9 became available to them. Revised Article 9 definitions and provisions
allow the transition from paper to electronic filing without further revision of the law.
Revised Article 9 makes filing-office operations more ministerial than old Article 9
did. The office in which the financing statements are filed has no responsibility for
the accuracy of information on the statements and is fully absolved from any liability
for the content of any statements received and filed. There is no signature
requirement for a financing statement.

5. Consumer Transactions
Revised Article 9 makes a clearer distinction between transactions in which the
debtor is a consumer than prior Article 9 did. Enforcement of a security interest that
is included in a consumer transaction is handled differently in certain respects in the
1998 revisions to Article 9 than it was before 1998. Examples of consumer provisions
are: a consumer cannot waive redemption rights in a financing agreement; a
consumer buyer of goods who prepays, in whole or in part, has an enforceable interest
in the purchased goods and may obtain the goods as a remedy; a consumer is entitled
to disclosure of the amount of any deficiency assessed against him or her, and the
method for calculating the deficiency; and, a secured creditor may not accept
collateral as partial satisfaction of a consumer obligation, so that choosing strict
foreclosure as a remedy means that no deficiency may be assessed against the debtor.
6. Default and Enforcement
Article 9 provisions on default and enforcement deal generally with the
procedures for obtaining property in which a creditor has a security interest and
selling it to satisfy the debt, when the debtor is in default. Normally, the creditor has
the right to repossess the property. Revised Article 9 includes new rules dealing with
"secondary" obligors (guarantors), new special rules for some of the new kinds of
property that is subject to security interests, new rules for the interests of
subordinate creditors with security interests in the same property, and new rules for
aspects of enforcement when the debtor is a consumer debtor. These are some of the
specific new rules: a secured party (creditor with security interest) is obliged to notify
a secondary obligor when there is a default, and a secondary obligor generally cannot
waive rights by becoming a secondary obligor; a secured party who repossesses goods
and sells them is subject to the usual warranties that are part of any sale; junior
secured creditors (subsequent in priority), and lienholders who have filed financing
statements, must be notified when a secured party repossesses collateral; and, if a
secured party sells collateral at a low price to an insider buyer, the price that should
have been obtained for the goods in a commercially reasonable sale, rather than the
actual price, is the price that will be used in calculating the deficiency.
For additional information, see the website of the National Conference of
Commissioners on Uniform State Laws at http://www.nccusl.org/
uniformact_factsheets/uniformacts-fs-ucca9.htm; and http://www.nccusl.org/
uniformact_summaries/uniformacts-s-uccra9st1999.htm. For the NCCUSL
drafting file for the uniform act, see http://www.law.upenn.edu/bll/ulc/ ulc.htm
#ucc9. For more information, see the Legislative Reference Bureau's drafting file for
this bill.
For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB111, s. 1 1Section 1. 30.57 (3) of the statutes is amended to read:
AB111,6,7
130.57 (3) Except as provided in sub. (4), a security interest is perfected by the
2delivery to the department of the existing certificate of title, if any, an application for
3a certificate of title containing the name and address of the secured party, and the
4required fee. The security interest is perfected as of the later of the time of its
5creation if delivery to the department is completed within 10 days after its creation
6and without regard to the limitations expressed in s. 409.301 (2); otherwise, as of the
7time of
delivery or the time of the attachment of the security interest.
AB111, s. 2 8Section 2. 30.57 (5) of the statutes is amended to read:
AB111,6,109 30.57 (5) An unperfected security interest is subordinate to the rights of
10persons described in s. 409.301 409.317.
AB111, s. 3 11Section 3. 30.57 (6) of the statutes is amended to read:
AB111,6,1512 30.57 (6) The rules of priority stated in s. 409.312, and 409.322, the other
13sections referred to in that section, and subch. III of ch. 409 shall, to the extent
14appropriate, apply to conflicting security interests in a boat of a type for which a
15certificate of title is required.
AB111, s. 4 16Section 4. 30.57 (7) of the statutes is amended to read:
AB111,6,2117 30.57 (7) The rules stated in ss. 409.501 to 409.507 subch. VI of ch. 409
18governing the rights and duties of secured parties and debtors and the requirements
19for, and effect of, disposition of a boat by a secured party, upon default shall, to the
20extent appropriate, govern the rights of secured parties and owners with respect to
21security interests in boats perfected under this section and ss. 30.572 and 30.573.
AB111, s. 5 22Section 5. 30.57 (8) of the statutes is amended to read:
AB111,6,2523 30.57 (8) If a boat is subject to a security interest when brought into this state,
24s. 409.103 (1), (2) and (3) state 409.316 states the rules which determine the validity
25and perfection of the security interest in this state.
AB111, s. 6
1Section 6. 30.573 (1) of the statutes is amended to read:
AB111,7,82 30.573 (1) A Except as otherwise provided in s. 409.308 (5), a secured party
3may assign, absolutely or otherwise, the secured party's security interest in a boat
4to a person other than the owner without affecting the interest of the owner or the
5validity of the security interest, but any person without notice of the assignment is
6protected in dealing with the secured party as the holder of the security interest and
7the secured party remains liable for any obligations as a secured party until the
8assignee is named as secured party on the certificate of title.
AB111, s. 7 9Section 7. 30.573 (2) of the statutes is amended to read:
AB111,7,1410 30.573 (2) To Subject to s. 409.308 (5), to perfect an assignment, the assignee
11may deliver to the department the certificate of title, the fee required under s. 30.537
12(4) (f) and an assignment by the secured party named in the certificate in the form
13the department prescribes. Upon receipt, the department shall name the assignee
14as a secured party on the certificate and issue a new certificate.
AB111, s. 8 15Section 8. 30.576 (1) of the statutes is amended to read:
AB111,7,2016 30.576 (1) Except as provided in sub. (2) and subject to s. 409.311 (4), the
17method provided in ss. 30.57 to 30.575 of perfecting and giving notice of security
18interests subject to those sections is exclusive. Security interests subject to ss. 30.57
19to 30.575 are exempt from the provisions of law that otherwise require or relate to
20the filing of instruments creating or evidencing security interests.
AB111, s. 9 21Section 9. 50.05 (15) (f) of the statutes is amended to read:
AB111,8,1422 50.05 (15) (f) The receiver shall, within 60 days after termination of the
23receivership, file a notice of any lien created under this subsection. No action on a
24lien created under this subsection may be brought more than 2 years after the date
25of filing. If the lien is on real property, the notice shall be filed with the clerk of circuit

1court of the county in which the facility is located and entered on the judgment and
2lien docket kept under s. 779.07. If the lien is on personal property, notice of the lien
3shall be filed with the department of financial institutions in the same manner, form,
4and place as financing statements are filed under subch. V of ch. 409 regarding
5debtors who are located in this state
. The department of financial institutions shall
6place file the notice of the lien on personal property in the same file as financing
7statements are filed under ss. 409.401 and 409.402 subch. V of ch. 409. The notice
8shall specify the name of the person against whom the lien is claimed, the name of
9the receiver, the dates of the petition for receivership and the termination of
10receivership, a description of the property involved and the amount claimed. No lien
11shall exist under this section against any person, on any property, or for any amount
12not specified in the notice filed under this paragraph. To the extent applicable, ch.
13846 controls the foreclosure of liens under this subsection that attach to real
14property.
AB111, s. 10 15Section 10. 51.42 (3) (d) 12. f. of the statutes is amended to read:
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